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Churn Prediction
Understanding and Reducing
Customer Attrition Your Name Date What is Churn? • Definition: • Customer Churn refers to the rate at which customers stop doing business with a company. • Importance: High churn rate can lead to revenue loss, reduced market share, and increased acquisition costs. Types of Churn • • Voluntary Churn: When customers choose to leave (e.g., cancel a subscription). • • Involuntary Churn: When customers leave due to issues beyond their control (e.g., payment failures). Importance of Churn Prediction • • Helps companies understand why customers leave. • • Enables proactive measures to reduce churn. • • Cost-effective: Retaining customers is cheaper than acquiring new ones. Data Used in Churn Prediction • • Demographic Data: Age, gender, location. • • Behavioral Data: Usage patterns, engagement level. • • Transactional Data: Purchase history, payment methods. • • Feedback Data: Customer reviews, surveys, support tickets. Churn Prediction Methods • • Traditional Methods: • - RFM (Recency, Frequency, Monetary) Analysis • - Cohort Analysis • • Machine Learning Models: - Decision Trees - Logistic Regression - Random Forest - Neural Networks Machine Learning Workflow • 1. Data Collection: Collect relevant customer data from multiple sources. • 2. Data Preprocessing: Handle missing values, normalize data, and feature selection. • 3. Model Training: Use algorithms like Logistic Regression, Random Forest, etc. • 4. Evaluation: Accuracy, Precision, Recall, F1 Score, ROC-AUC Curve. • 5. Deployment: Integrate with business processes to monitor live data. Common Metrics in Churn Prediction • • Accuracy: The percentage of correct predictions. • • Precision: The percentage of positive predictions that are correct. • • Recall: The percentage of actual churners that were correctly identified. • • F1 Score: Harmonic mean of precision and recall. • • ROC-AUC: The ability of the model to distinguish between churn and non-churn. Reducing Churn: Strategies • • Improve Customer Support: Fast and efficient customer support can resolve issues that lead to churn. • • Personalization: Use customer data to tailor services and offers. • • Loyalty Programs: Encourage customer retention with incentives. • • Feedback Systems: Collect feedback to identify problems early. Challenges in Churn Prediction • • Data Quality: Incomplete or biased data can affect the accuracy. • • Interpretability: Some models like Neural Networks are complex to interpret. • • Changing Customer Behavior: Constant monitoring is needed to adapt to new patterns. Conclusion • • Churn prediction is crucial for businesses that rely on customer retention. • • Machine learning can provide accurate, actionable insights. • • Reducing churn leads to significant long- term growth. Q&A • Open the floor for any questions from the audience.